Compliance

700Credit is hosting a free webinar on Thursday that aims to answer many questions on dealers’ minds when it comes to compliance.

The Adverse Action, Red Flag and Risk-Based Pricing compliance webinar, titled Dealer Knowledge Webinar: Compliance Questions Answered, is scheduled for 2 p.m. (ET) to 3 p.m. on Thursday. The company said it is meant to be informational, data-driven and designed to tackle these compliance challenges dealers face under new regulations:

How to manage adverse action obligations

Adhering to risk-based pricing regulation guidelines

Crafting an Identity Theft Prevention Program and solutions for Red Flag regulations

The companies explained AppOne can help to automate the credit approval and compliance processes for finance companies and the dealerships in their networks.

This integration can provide Automotive Credit with access to the AppOne network of independent dealers as well as Wolters Kluwer Financial Services’ network of Bankers Systems motor vehicle retail installment contracts, which can help ensure loan documentation is accurate and compliant.

“Compliance requirements are a real challenge for dealerships. This is a significant new tool in our efforts to help alleviate the burdens of complicated F&I functions so they can focus their energy on meeting the needs of their customers,” said Jeff Glaser, vice president of sales and marketing with Automotive Credit.

“The new platform not only simplifies the loan origination process, but it also helps build relationships with more dealers,” Glaser continued.

“Automotive Credit Corporation has a strong reputation for its dedication to serving the sub-prime auto financing needs of dealers and clients, and we are excited to help support their efforts so they can continue to grow safely and profitably,” Fleener went on to say.

BillingTree announced the next webinar in its series titled, Payment & Technology Spotlight Series — Technology and Innovation for the Digital Age.

With the upcoming segment putting the spotlight on compliance, BillingTree highlighted the free session will feature a virtual panel discussion by a group of leading industry professionals who will share their unique experiences and perspectives on major compliance topics which have an effect on any organization that falls under the Consumer Financial Protection Bureau’s oversight including collection agencies, lenders, auto financiers and credit unions.

The panel, which includes Charity Olson, managing attorney with the Olson Law Group and Jennifer Philips, financial services director with Ontario Systems Compliance Consulting, will hold in depth discussion on subjects such as Regulation E, the E-Sign Act and Convenience Fees.

Audience questions and participation are encouraged during the 60-minute live session.

The live webinar will take place on Nov. 18 at 1 p.m. ET, and participation is free of charge for industry professionals.

The Payment & Technology Spotlight Series is sponsored by BillingTree and was launched earlier this year with complimentary webinars including “Interactive Voice Response — Utilizing IVR Technology to Drive Agency Growth” and the “Three Virtual Virtues: Agents, Negotiation & Settlement.” Recordings of both session are available for replay upon request.

Companies interested in contributing to a future event in the Payment & Technology Spotlight Series can email marketing@mybillingtree.com.

While the first cohort will be completing the training at the same location as next month’s Used Car Week, the National Automotive Finance Association is now beginning enrollment for its next group of professionals who are looking to complete the Consumer Credit Compliance Certification Program.

NAF Association officials announced the first module of the program will be conducted on Jan. 8 and 9 at the Atlanta Airport Marriott in Atlanta.

After the day and a half of classroom-style learning in Atlanta for Module No. 1, participants will move onto the 29 self-paced Web-based sessions covering federal and state laws and regulations that govern the auto financing business. Successful testing throughout the program is necessary before progressing in the program.

The certification of Compliance Professional awarded upon completion of Module No. 4, a live classroom session covering the Consumer Financial Protection Bureau.

The NAF Association opened the program earlier this year and is on tap to close the first round of curriculum with that fourth module at the Red Rock Casino, Resort and Spa in Las Vegas, also the site of Used Car Week that begins on Nov. 10.

NAF Association executive director Jack Tracey explained why the compliance training is so important for finance companies to consider nowadays.

“A critical part of a compliance management system is staffing it with qualified compliance personnel,” Tracey said. “A company having their compliance officer(s) certified through a comprehensive educational program is a clear demonstration of the importance the organization places on compliance.”

This program is available to the staff of NAF Association member companies at the price of $2,000 per person and non-member companies at $2,600 per person.

Tracey noted registration rates for non-member companies are increasing. After Dec. 1, the cost for staff of non-member companies will be $3000.

“Register early to reserve your spot and avoid the registration increase,” Tracey said.

This week, the Consumer Financial Protection Bureau finalized a rule to promote more effective privacy disclosures from financial institutions to their customers. The new rule, which was proposed in May, allows companies that limit their consumer data-sharing and meet other requirements to post their annual privacy notices online rather than delivering them individually.

“Consumers need clear and accessible information about how their personal information is being used in the marketplace, but some of these requirements were redundant,” CFPB director Richard Cordray said. “Posting privacy notices online will make it easier for consumers to access these important policies, while also making it cheaper for financial institutions to provide disclosures.”

If the institution does share this information with an unaffiliated third party, it typically must notify consumers of their right to opt out of the sharing and inform them of how to do so.

Under the CFPB’s new rule, the bureau explained financial institutions will be able to post privacy notices online instead of distributing an annual paper copy, if they satisfy certain conditions such as not sharing data in ways that would trigger consumers’ opt-out rights.

Officials added the new rule applies to both banks and those nonbanks that are within the CFPB’s jurisdiction under the GLBA such as auto finance companies and institutions that offer vehicle financing. Institutions that choose to rely on this new method of delivering privacy notices will be required to use the model disclosure form developed by federal regulatory agencies in 2009.

Under the new rule, the CFPB indicated that if an institution qualifies for and wants to rely on the online disclosure method, it will have to inform consumers annually about the availability of the disclosures. Previously, institutions were required to send consumers a separate communication about privacy disclosures.

The bureau noted the new rule allows institutions to include a notice on a regular consumer communication, such as a monthly billing statement for a credit card, letting consumers know that the annual privacy notice is available online and in paper by request at a provided telephone number.

If an institution chooses not to use the new disclosure method, it will need to continue to deliver annual privacy notices to its customers using other delivery methods, according to the CFPB.

Officials went on to highlight the benefits of the new rule include:

• Constant access to privacy policies: Previously, consumers would receive a copy of their financial institution’s privacy policies once per year. If financial institutions choose the new alternative delivery method, consumers will be able to view their institution’s privacy policies at any time, while still receiving notices through existing delivery methods if the policies’ terms change. The online privacy notices will not require a login to view. For those customers with limited or no internet access, financial institutions will have to mail annual notices within 10 days to customers who request them by phone.

• Limited data sharing: If an institution shares data with unaffiliated third parties in a way that triggers customers’ rights to opt out of such sharing, then that institution generally would not be allowed to use the alternative delivery method. For this reason, financial institutions have an incentive to limit their sharing to reduce their costs.

• Educating consumers: When financial institutions post their privacy policies on their websites using the new delivery method, they must use the model disclosure form designed by federal regulators. The model disclosure form allows consumers who are concerned about their personal information to easily understand their financial institution’s privacy policy. Consumers can thus better educate themselves about the various types of privacy policies.

• Cheaper for companies to notify consumers of privacy practices: The CFPB anticipates that the rule will reduce the cost for companies to provide annual privacy notices. The Bureau estimates that about $17 million could be saved by the industry annually if institutions choose the new online disclosure method.

The bureau is finalizing the rule largely as it was proposed in May, with a number of technical, clarifying, and minor revisions. The rule will be effective immediately upon publication in the Federal Register.

As more major retailers are being hacked for consumer information, Dealertrack Technologies made five recommendations to help dealerships protect themselves, their customers, store data and ultimately, profitability.

Among the five steps shared by Sharon Kitzman, vice president and general manager of DMS for Dealertrack, were:

— Create privacy notices that address the sharing of data.

— Carefully vet and contractually bind partners to confidentiality and specified, limited use of dealer data.

— Limit partner access to only those data modules required for them to perform the contracted-for services.

— Reserve the right to restrict access to data as your business needs change.

— Terminate access to your dealer data immediately at the end of a relationship.

“The combination of smart technology and smart data sharing and security practices is your best defense against lost or stolen customer and dealer data,” Kitzman said in a blog post on the company’s website. “By demonstrating to customers that you can practically and confidently protect their information, it will go a long way in winning their confidence and future business.”

Kitzman emphasized these practices are important because some partners may claim that they need to own or have irrevocable license to dealer data.

“Others may want to hide what data they are pulling and how they are using it, and many charge exorbitant amounts to integrate your data — data that belongs to you — into their systems,” Kitzman said.

“The bottom line is that you need to inspect your own dealership’s data practices to ensure that your technology partners are doing only what you approve,” she went on to say.

Kitzman’s colleague from Dealertrack — Michael Collins — likely will be talking about data security and more during his afternoon keynote presentation at the SubPrime Forum, the Used Car Week segment dedicated to the financing side of the business.

Collins, Dealertrack’s senior vice president of F&I solutions, will be asking the question, “Is today’s subprime market the ‘new normal?” Collins will deliver a unique perspective on how the subprime market has helped to fuel the auto industry’s recent success. He will deliver trends seen in both used-vehicle and subprime financing, share insights of how the in-store to online financing process has begun to transform the way consumers conduct their vehicle purchase, and also review what is in store for 2015.

Collins’ presentation is one of the many highlights of the SubPrime Forum, an event orchestrated in partnership with the National Automotive Finance Association.

This three-day conference will provide data, knowledge, insight and powerful business networking opportunities to spur innovation and drive growth in the growing subprime auto finance marketplace. Presented by SubPrime Auto Finance News and SubPrimeNews.com, and in affiliation with the NAF Association, the event will offer a best-in-class forum for executives and thought-leaders in the auto finance vertical.

The SubPrime Forum is set for Nov. 10 through Nov. 12 at the Red Rock Casino, Resort and Spa in Las Vegas. It’s a part of Used Car Week, which includes the CPO Forum, the Re3 Conference and the National Remarketing Conference.

All member-company staff of the NAF Association are $100 eligible for a discount of off the standard registration fee for the SubPrime Forum. Use discount code NAF2014 when registering.

Officials from eLEND Solutions highlighted the seven main components of CreditPlus, the next generation of their online, interactive credit application platform.

Launched on Monday, the company explained CreditPlus can instantly pre-approve shoppers based on dealer-defined credit criteria and can provide shoppers with direct, upfront access to dealership financing sources and real near-final terms of approval from multiple lenders, all of which are controlled by the dealer.

With CreditPlus, officials insisted that for the first time, dealers are able to match a buyer’s credit profile with the right vehicle and the right financing program before the customer has even started the test drive.

Pete MacInnis, chief executive officer of eLEND Solutions emphasized this solution can facilitate a more equal exchange of information between consumer and dealer and the structuring of a more profitable deal.

“Today’s shoppers expect more information, multiple choices, transparency and immediate gratification,” he continued. "CreditPlus, powered by a patented rules-based loan decision engine, allows the customer to select from a menu of approved near-final finance terms, such as APR, term, monthly payment, down payment) from multiple lenders — all controlled by the dealer.”

Here are the seven major elements in how CreditPlus is geared to operate:

— Better consumer experience: The company indicated CreditPlus features an easy, short interactive application that is geared to be 100 percent mobile and tablet adaptive. Applicants not only can get approved for financing in seconds, but they can also view their credit score and pick their payments — all of which is designed to drive engagement and accelerate conversion of online shoppers into showroom buyers.

— Better dealer controlled experience: CreditPlus can offer dealers numerous application configuration options, including videos, vehicle detail image selections and lead management tools. The company stressed that dealers are in complete control of credit criteria and payment terms displayed to the customer, which can also can include dealer mark-up, doc fees, service contracts and more.

— Electronic lender rate card: The company pointed out CreditPlus is powered by a rules-based loan decision engine that can aggregate a limitless universe of finance company programs based on credit, stability and ability. Results from real multiple loan underwriting rules, APRs, program guidelines and more are available instantly to the dealer and the customer.

— Communication and system integrations: CreditPlus can drive engagement via automated email and text communications, chat integrations, automated system escalations and alerts — all designed to keep dealers in touch with ready-to buy online shoppers and convert them into showroom buyers faster.

— Security: eLEND Solutions is EI3PA Certified, the highest level of security certification in the industry, offering the most secure environment for collecting, storing, retrieving, modifying or auditing applications.

— Compliance and CFPB protection: Officials contend CreditPlus’ rules-based loan decision engine does not support decisions/terms that could be considered discriminatory or subjective. They added eLEND’s platform includes loan decision reporting and audit trail processes that can be made transparent to dealers, lenders and the Consumer Financial Protection Bureau.

— Industry Neutral Solution: The company noted eLEND Solutions’ credit platform, deal structuring decision engine and API platform is agnostic and compatible with any dealer desk tool and can be integrated seamlessly with all dealer websites and service providers, including inventory management and CRM providers, finance platforms and dealer management systems.

“We’ve witnessed two decades of innovation in online car buying, but the financing process remains outdated and low-tech. This lack of innovation has not only cost dealers time and money, but it has also seriously alienated consumers, who increasingly demand online transparency in everything they do,” MacInnis said.

“CreditPlus’ real, upfront loan terms are a missing piece of the car-buying revolution, bringing dealers more high-quality credit app leads, while slashing the current 3 to 4 hour sales process,” he went on to say.

The study showed that GPIS generated a 2,000-percent uplift in submitted credit applications vs. other standard long-forms submitted on dealer websites. The study mentioned that 50 percent of consumers who start the GPIS credit application complete it versus a mere four percent who complete the process with the traditional static application.

Furthermore, according to a recent IHS Automotive custom analysis of 1,400 dealers nationwide showed that of those consumers that submitted eLEND’s short-form credit application, 54 percent purchased a vehicle and those purchasing from the intended dealer saw average buy rates of 28 percent.

Performance was dramatically higher than the 6 percent to 8 percent closing ratio for standard third party leads, according to Cobalt.

Norm Reeves Honda Superstore general manager Brad Mugg said, “eLEND’s online credit application has been the best lead conversion tool for our dealer group for the past eight years.

“We expect that CreditPlus will drive even higher submit-to-sales conversions and will help us sell and finance more cars, with more speed, transparency and profitability than ever before,” Mugg continued.

The Association of Finance and Insurance Professionals (AFIP) announced Brian Vance, the regional F&I manager in the Midwest office of Zurich North America, earned his master certification at an AFIP Certification Boot Camp in Overland Park, Kan., this summer.

Vance is the second Zurich executive to earn master certification, following Scott Gagne, the Wisconsin regional F&I Manager who achieved master status in early 2013.

Regarding his accomplishment, Vance said, “We’re very engaged with our clients in the area of compliance. More knowledge is always better.”

Vance had 13 years of experience on the retail side of the automotive business, moving from sales to dealership F&I director, before joining Zurich about 11 years ago. He served Zurich as an F&I executive, account executive and national F&I executive before being named to his current position in 2010.

The Zurich direct markets unit, based in Overland Park, Kan., markets a full range of F&I products and services, as well as garage liability insurance. The company celebrated its 100th anniversary in 2012.

Vance earned his basic AFIP certification in 1994.

Vance serves as a member of the Zurich F&I Steering Committee and F&I Thought Leadership Editorial Board. A certified insurance counselor, Vance is also working to earn the certified risk manager designation and is attending the University of Phoenix.

National Automobile Dealers Association chairman Forrest McConnell reiterated his arguments this week against points made by federal regulators, especially the Consumer Financial Protection Bureau. McConnell emphasized in remarks to the Automotive Press Association in Detroit that dealers compete fiercely against each other on vehicle pricing, financing and service, which reduces costs for consumers.

“Competing with the dealer down the street or on the Internet benefits car buyers across the nation,” McConnell said.

As a percentage of total sales in the new, used and service/parts departments, NADA declared that net pretax profit at franchised dealerships was just 2.2 percent in 2013.

“Our manufacturers benefit from a high return on capital in making vehicles, as opposed to the low margin of selling them, because dealers bear the cost and risks of these investments — at virtually no cost to the manufacturer,” he said.

McConnell, a Honda and Acura dealer from Montgomery, Ala., said there’s a simple reason why manufacturers use dealers to sell new vehicles.

“The franchised dealer network is the most competitive, the most cost-effective and most pro-consumer model for buying and selling new cars and trucks,” McConnell said.

“If manufacturers sold directly to customers, there would be zero competition in pricing vehicles, parts and service,” he continued. “Car buyers would be stuck paying the full sticker price — because there would be no ‘same-brand dealership’ to shop and compare prices.”

McConnell added that dealer-assisted financing, which is optional, increases competition for buyers, and the retail finance rate offered by dealers is often more competitive than a bank or credit union.

“We work with multiple lenders who compete for the dealers’ business by offering us low financing rates,” McConnell said.

“The bottom line is this: dealer-assisted financing provides car buyers with the ability to get a discounted auto rate from the dealer,” he continued. “And low rates mean lower car payments for our customers. But the government is trying to take away a customer’s right to get that discount.”

NADA maintained that the controversy with the CFPB has been ongoing since March of last year when the agency issued its guidance on indirect auto lending. McConnell and the association contend the bureau took the wrong direction by attempting to eliminate the flexibility of dealers to discount financing rates offered to their customers by pressuring finance companies to switch to a flat-fee compensation system.

“We can all agree on one thing: We are all against discrimination. There’s no room for it in this business or any other business,” McConnell said.

But what we can’t agree on is the CFPB’s insistence on a flat-fee model — which eliminates a customer’s right to get a discount,” he continued. “Right now, dealers are incentivized to select the lender that offers us the lowest available rate. The current system works because it forces banks to compete and offer dealers low rates to get their business.

"Next, dealers have to discount those rates to beat the competition or meet a customer’s budget. Those two competitive factors drive rates lower for our customers,” McConnell went on to say.

Then the NADA chairman asked the gathering in the Motor City a question.

“What happens to customers if the current system changes to flat fees? Lenders will want to pay higher flats to get business. Not lower interest rates. That would give dealers the incentive to select the lender that offers the highest flat fee. That doesn’t help car buyers save money,” McConnell said.

Back in January, NADA developed an optional Fair Credit Compliance Policy and Program for dealerships, which was released in partnership with the National Association of Minority Automobile Dealers and the American International Automobile Dealers Association.

“We’ve come up with a solution to address all the risks the CFPB talks about — a dealer following the program sets a standard starting point for dealer reserve,” McConnell said.

“This gives a dealer who adopts the program the ability to discount the finance rate when there is a legitimate business reason — like helping a customer fit a monthly payment plan into his or her budget,” he continued.

McConnell closed his appearance by mentioning that since March of last year the industry — from dealers to finance companies — and Congress have worked to bring greater transparency and accountability to the CFPB.

“There haven’t been many issues lately where members of Congress have seen eye to eye,” McConnell said. “But the CFPB’s flawed position is one of them.”

Last month, Reps. Ed Perlmutter (D-Colo.) and Marlin Stutzman (R-Ind.) introduced H.R. 5403, a bipartisan bill to nullify the CFPB’s auto lending guidance. So far, NADA indicated 69 Republicans and 40 Democrats in the U.S. House of Representatives support the dealer’s ability to discount the rate for our customers.

The company explained that since most consumers finance or lease their vehicles, today’s dealer websites provide a variety of what officials described as “disjointed and often conflicting” credit-related services. These services can include items such as a “get pre-approved” product, generic payment calculators, a search-by-payment option, trade-in valuations and full credit applications that require personal information.

DriveItNow president Tarry Shebesta pointed out these services are usually from different vendors that require the shopper to provide their information multiple times.

“DriveItNow’s Credit Center ties all auto finance-related services together through one simple-to-integrate website widget,” Shebasta said. “Online shoppers can easily access what they need in one place without having to provide personal information or complete multiple forms.”

At the core of the Credit Center platform is DriveItNow’s patent-pending pre-qualification payment quoting technology. Shebesta indicated that real monthly payments are quoted using the dealer’s finance company programs and the consumer’s actual credit bureau, without requiring a Social Security Number or date of birth or affecting the consumer’s credit score.

“Other industry services that quote monthly payments and finance rates are not always accurate or compliant and are not based on the consumer’s actual credit bureau,” Shebesta said. “Those services display best-case scenarios which may give shoppers an unrealistic expectation of what they can actually afford to buy.”

DriveItNow also displays fully compliant disclosures and works with compliance experts to ensure dealers comply with federal rules and regulations of the Fair Credit Reporting Act and Consumer Financial Protection Bureau.

DriveItNow’s Credit Center services include:

• Short-form finance application with instant pre-qualification

• Pre-qualified monthly payment buttons on vehicle inventory

• Shop-by-payment functionality

• Trade-in equity calculation

• OEM loan and lease special promotions

• Real-time “soft pull” full credit bureau reports

Shebesta also noted all Credit Center services can be accessed from various links throughout a website, within email marketing campaigns or social media.

“Other industry vendors are trying to play catch up as we continue to lead in this market segment,” Shebesta said. “Our 14 years of online experience as a direct-to-consumer finance company, and dealer, gives us the advantage in knowing what engages online shoppers. We don’t rely on surveys or focus groups.”

A mobile version of these services is also available and is compatible with responsive website platforms.

DriveItNow’s Credit Center is available to dealers, OEMs, classified and finance portals and website vendors.